The April 2025 Car Tax Changes: A Complete Guide

The UK car tax system is undergoing a major overhaul from April 1st, 2025. 

Electric vehicles will lose their tax-free status, petrol and diesel cars will be hit with higher first-year rates, and luxury car owners will face steeper charges.

Why the changes? Primarily, the government wants to encourage the adoption of low-emission vehicles to help the UK reach its 2050 net-zero target. They also aim to make the tax system fairer and more sustainable in the long run.

Here, we’ll dive into the details of the new tax rules and provide practical tips to help you steer yourself through the changes with ease.

Electric Vehicles: The End of the Tax-Free Era

First and foremost., electric vehicles (EVs) will no longer be exempt from road tax.

This means EV owners will need to start contributing to the upkeep of UK roads, just like petrol and diesel vehicle owners. 

New EVs (Registered on or after April 1, 2025)

• First-year tax rate: £10.
• From the second year onward: £195 annually.
• Expensive Car Supplement: If the EV has a list price over £40,000, an additional £425 per year will apply from the second to the sixth year of ownership.

Existing EVs (Registered between April 1, 2017, and March 31, 2025)

• These vehicles will transition to the standard road tax rate of £195 per year, starting April 1, 2025.

Older EVs (Registered before April 1, 2017)

• Owners of these vehicles will pay a reduced annual tax rate of £20.

Pro Tip: Delay the Charges!

If you want to postpone paying road tax on your EV, simply renew your vehicle’s tax before March 31st, 2025. 

This will extend your current £0 tax rate for another 12 months, giving you until April 2026 before the new charges kick in.

Petrol and Diesel Cars: Higher First-Year Rates

Petrol and diesel car buyers should be prepared for increased first-year tax rates, which are set to double for most emission bands. 

This means you’ll face higher upfront costs when purchasing a new vehicle. Here are some examples:

• Cars emitting 1-50g/km of CO2 (mainly plug-in hybrids): First-year tax will increase from £10 to £110.
• Cars emitting 51-75g/km of CO2: First-year tax will rise from £30 to £135.
• Cars emitting 76-90g/km of CO2: First-year tax will double from £135 to £270.

While they look steep, these changes are part of the government’s effort to promote the adoption of lower-emission vehicles and help the country achieve its net-zero emissions target by 2050.

The Expensive Car Supplement Increases

If you’re planning to buy a high-end vehicle, it’s important to be aware of the upcoming increase in the Expensive Car Supplement (ECS), commonly known as the “luxury car tax.”

What’s Changing?

• Currently, the ECS stands at £355 per year.
• From April 1, 2025, it will increase to £425 per year.
• This tax applies to vehicles with a list price exceeding £40,000.

How Does It Work?

• The ECS is payable for five years, starting from the second year of registration.
• This means owners of eligible vehicles registered on or after April 1, 2025, will need to pay the increased rate from year two through year six.

Key Considerations for Buyers

If you’re considering purchasing a high-end petrol, diesel, hybrid, or electric vehicle (EV), it’s crucial to factor this additional cost into your budget.

Since the supplement is calculated based on the vehicle’s list price, including optional extras, even minor upgrades could push a car above the £40,000 threshold.

Additionally, for the first time, EVs registered after April 1, 2025, will be subject to the ECS if their list price exceeds £40,000. Previously, EVs were exempt from this charge.

Older Vehicles Face Changes, Too

Even if your car was registered before March 31, 2017, you’ll see some changes to your tax bands. 

The most notable change is that cars emitting 0-100g/km of CO2, which were previously tax-free, will now pay £20 per year. Other tax bands for pre-2017 vehicles will see increases ranging from £5 to £25. 

To determine your vehicle’s tax band, consult the government’s vehicle tax rate tables or your vehicle’s logbook (V5C).

Determining Your Vehicle’s Tax Band

If you’re unsure about your vehicle’s tax band, there are several ways to find out:

1. Check the online tax rate tables: The UK government provides detailed tax rate tables on their website, allowing you to look up the tax bands and rates for vehicles registered at different times.
2. Consult your vehicle’s logbook (V5C): Your vehicle’s logbook contains information about its CO2 emissions and registration date, which will help you determine its tax band.
3. Use the online vehicle tax calculator: The government offers an online tool where you can enter your vehicle’s details and calculate the applicable tax rates.

Implications for Vehicle Owners

Now that we’ve covered the main changes, let’s explore how they might affect you as a vehicle owner in the UK.

Electric Vehicle Owners

If you own an EV, you’ll need to start budgeting for road tax. 

While it may be an unwelcome expense, remember that EVs still offer significant savings on fuel costs and are more environmentally friendly. 

Petrol and Diesel Car Buyers

If you’re planning to purchase a new petrol or diesel car, be aware that higher first-year tax rates could increase your initial costs. 

Consider choosing a lower-emission vehicle to minimise your tax burden and contribute to the UK’s environmental goals.

Luxury Car Enthusiasts

If you’re in the market for a high-end vehicle, keep in mind that the price of car supplements is increasing. Factor this into your budget when deciding whether to invest in your dream car.

Owners of Older Vehicles

Even if you own an older car, you may experience a slight increase in your annual tax bill. While it’s not a substantial change, it’s still important to be aware of it as you plan your budget.

How Double Point Can Assist You

At Double Point, our team of experienced chartered accountants is here to help you understand and manage the April 2025 car tax changes. Here’s how we can support you:

1. Personalised advice: We’ll review your vehicle’s details and provide tailored guidance on how the tax changes will affect you specifically.
2. Tax planning: Our experts can help you develop a tax-efficient strategy for your vehicle ownership, considering factors like emission levels, list price, and registration date.
3. Compliance support: We’ll ensure you’re meeting all your vehicle tax obligations, including filing paperwork and making timely payments.
4. Ongoing guidance: As tax regulations evolve, we’ll keep you informed and provide continuous support to help you stay compliant and tax-efficient.

If you have questions about the April 2025 car tax changes or want to discuss your specific situation, don’t hesitate to reach out to us. We’re here to guide you through the changes with confidence.